Explain the Relationship between Token Volatility and the Severity of Impermanent Loss

The severity of impermanent loss is directly proportional to the magnitude of the price divergence, which is heavily influenced by token volatility. Higher volatility means greater and more frequent price swings, leading to larger and more frequent changes in the token ratio within the pool.

This constant rebalancing by arbitrageurs results in a greater cumulative impermanent loss over time compared to less volatile pairs.